8.8A Special rules under new law for otherwise deductible rule and jointly provided loan fringe benefits

As described in section 8.8, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that loan fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rules also apply, the new law provides a special rule so that the otherwise deductible rule only applies to the employee's share of any deductible amount, and specifically excludes the associate's share of any deductible amount.



the loan fringe benefit was provided or the loan arrangement was entered into before 7.30pm AEST on 13 May 2008

the previous law will continue to apply until 1 April 2009.

the loan fringe benefit was provided or the loan arrangement was entered into from 7.30pm (AEST) on 13 May 2008

the special rules under the new law apply.

Previous law

Under the previous law, an employer can reduce the taxable value of a loan fringe benefit provided jointly to an employee and their associate where the loan is applied to pay for an income earning asset owned by both the employee and their associate, to the extent that the asset produces assessable income by both persons (unadjusted notional deduction).

Amended law

Under the amended law, you must adjust the taxable value of a fringe benefit determined under the previous law (unadjusted notional deduction) by only allowing the employee's share of the deduction.

That is, the otherwise deductible amount is calculated as:

Unadjusted notional deduction x employee's percentage of interest


  • the unadjusted notional deduction is the deduction calculated as if the new law did not apply
  • the employee's percentage of interest is the employee's (not the associate's) interest in the asset
    • which is purchased with all or part of the loan, and
    • is applied or used for the purpose of producing assessable income of the employee.
Example: previous law applies

An employer provides an employee and her husband with a $100,000 low interest loan which they use to purchase shares. The loan fringe benefit has a taxable value of $10,000. The employee and her husband use the loan to purchase $100,000 worth of shares which they will hold jointly with a 50% interest each. The employee and her husband each include 50% of the dividends from the shares as assessable income in their income tax returns.

If the loan arrangement has operated from 31 March 2006 and continues throughout the 2009 FBT year, the otherwise deductible rule would apply to reduce the taxable value of the loan fringe benefit by both the employee's and her associate's share of the benefit. That is, the $10,000 loan fringe benefit would be reduced to nil and the employer would not have an FBT liability for the FBT year ending 31 March 2009.

Example: amended law applies

If the agreement was entered into and the loan was provided on 1 June 2008, the otherwise deductible rule would still apply, but the taxable value could only be reduced by the employee's share in the income producing asset - that is, $10,000 x 50% = $5,000.

    Last modified: 03 Jul 2012QC 17821